ΙΔΡΥΜΑ ΟΙΚΟΝΟΜΙΚΩΝ & ΒΙΟΜΗΧΑΝΙΚΩΝ ΕΡΕΥΝΩΝ
FOUNDATION FOR ECONOMIC & INDUSTRIAL RESEARCH
The ICT sector in Greece:
Main facts and growth prospects
Aggelos Tsakanikas, Phd
Head of Research,
Foundation for Economic and Industrial Research (FEIR/IOBE)
[email protected]
Ermoupolis Seminars:
Research Group for the technological, economic and strategic
analysis of the Information Society
Syros, 14 July 2007
1
Towards a definition …

Need for comparable and reliable data for the various dimensions of
Information Society both on the demand side...



i.e Internet use: numerous studies but what kind of use (frequency of use,
information fishing or in depth use?), etc
E-commerce: Involves what?, what are the B2B limits; etc
...and the supply side : Need for a common understanding for the kind
of firms that form the ICT sector (clarifying thus data on trade flows
market volume, etc)
However:

National approaches adopted by the main global ICT producers (USA,
Canada, Japan)

Various national approaches due to the different level of integration and
diffusion of ICTs in the economic activities of each country.

From the mid-90s, along with the rapid growth of “new technologies”
some preliminary efforts for aligning national definitions and adoption of
a common methods and standards for measuring ICTs
2
Conceptual content of the ICT sector
Difficult task for two reasons :
 Includes activities related with rapidly changing
technologies from various sectors of the economy: ICT
producers (manufacturing), ICT trade (retail, wholesaling),
ICT services.
 Rapidly changing technologies that lead to technology
fusion (mixing services with manufacturing), emerging new
activities hard to classify, traditional activities that are
transforming (i.e publishing): blurring the borders between
old taxonomies and various distinct activities
Two (complementary) approaches for the ICT sector
 From the firms’ side and their primary activities (top-down
approach)
 From the products / services’ side (bottom up approach).
Problems for both approaches
3
OECD Definition
(1998, revised 2002, new revision planned n 2007)
NACE description
NACE code
MANUFACTURING
Manufacture of office machinery and computers
30
Manufacture of insulated wire and cable
31.3
Manufacture of radio, television and communication equipment and apparatus
32
Manufacture of instruments and appliances for measuring, checking, testing,
navigating and other purposes, except industrial process control equipment
33.2
Manufacture of industrial process control equipment
33.3
TRADE
Wholesale of electrical household appliances and radio and television goods
5143
Wholesale of machinery, equipment and supplies
518
(not exhaustive selection of firms)
SERVICES
Renting of office machinery and equipment, including computers
713.3
Computer and related activities
72
Telecommunications
64.2
4
Domestic ICT sector
(IOBE’s definition)




All firms with a primary activity in “OECD sectors’’
Additional important firms from the retail sector, not
covered by OECD (i.e. KOTSOVOLOS, MULTIRAMA)
Firm with at least two secondary activities in the “OECD
sectors’’, although their primary activity is different (i.e in
Business Services NACE: 74)
Selected members of SEPE / SEPVE
An alternative taxonomy (bottom up approach):
Α) ICT Manufacturing : The ICT industry
Β) ICT trade : Wholesalers and selected retailers (box moving, gadgets etc)
C) Carrier services & ISPs: Fixed and mobile telephony, Internet providers
D) Software: licenses and customized software
Ε) IT services : Numerous firms
Furthermore: Core sector vs “periphery”
5
The Greek ICT sector: main facts

~1800 firms (Ltd or S.A.)


Almost 40% in NACE 72



~13000 (including all legal entities, sole proprietorships, etc)
(Computer & related activities)
36% in Wholesale (box moving, gadgets) .
Number of IT-Telcos: 87% -13%
Core sector: 73% (~1300 firms)
IT services
35,9%
ICT manufacturing
7,8%
ICT trade
40,1%
Software
7,4%
ICT’s sector contribution
to GDP: ~4%
Carrier services
8,7%
6
The Greek ICT sector: main facts
Founding date
% firms
• 83% founded after 1990
Before 1970
1,1%
• One out of four ICT firms founded after 2000
1970-1979
2,0%
1980-1989
13,4%
•Mostly IT services (70% after 1995)
1990-1995
23,5%
1996-2000
34,9%
2001-2005
25,0%
• Older firms mainly from manufacturing
(electronic parts and related material, wires, etc)
• 82% up to 50 employees
• 83,2% of IT up to 50 employees (67,3% in
Telcos).
• Average IT firm: 43 persons (122 in Telcos,
without ΟΤΕ).
•Median IT firm: 15 persons (24 in Telcos)
•Employment in IT-Telcos: 40-60%
Size
%
≤10 employees
36,8
11-49 employees
44,7
50-249 employees
14,8
≥250 employees
3,7
7
The Greek ICT sector: main facts
• 34% of employees in the ICT
sector work in Carriers an 31%
in Trade
• 13% increase in 2006
Regions
Attica
Central Macedonia
West Greece
Crete
Thessaly
East Macedonia & Thrace
Peloponnese
Central Greece
South Aegean, Epirus, Ionian Islands,
North Aegean,West Macedonia
EMPLOYMENT
2004
2005
2006
8231
9109
9634
ICT trade
25212
27717
30639
Carriers
28425
28068
33222
IT services & Software
22230
21411
24089
Total
84098
86306
97583
ICT manufacturing
% of all entities
54.7%
16.6%
4.5%
3.9%
3.5%
3.3%
2.8%
2.7%
<2% each

The sector is overconcentrated in
Attica: 77% of SA &
Ltd

However faster
growth outside Attica
8
The Greek ICT sector: financial situation
Billion €
2002 2003 2004 2005
03/02 04/03
05/04
Turnover
16,5
17,6
18,9
17,7
6,6%
7,2%*
-6,2%
Profit (before tax)
1,5
1,6
1,4
0,7
7,2%
-14,3%*
-52,2%
Total assets
22,1
22,8
22,7
24,4
3,3%
-0,1%
7,1%
* Without OTE, sales in 2004 increased by 10% and profits by 22% (-6.4% & -28% in 2005
• The ICT sector’s financial situation is mainly influenced by OTE.
•OTE and mobile firms hold the 37% of the ICT market (slightly falling each year)
• 69% of the ICT firms had net profits (2005) that sum up to 1.5 billion €, but
more than 60% of it comes from two mobile firms (Cosmote, Vodafone)
•2004: 73% of firms with profits that sum up to 1.75 billion €) up to (55% of
it comes from the same two firms)
•OTE is responsible for half the losses in the sector (2005)
9
The Greek ICT sector: financial
situation
Turnover (Billion €)
2002 2003
2004 2005 03/02
04/03
05/04
ICT manufacturing
1,40
1,22
1,22
1,13
-12,4%
-0,6%
-7,1%
ICT trade
6,10
6,67
7,29
6,59
9,2%
9,3%
-9,6%
Carriers
7,50
8,18
8,79
8,46
9,1%
7,4%
-3,8%
Software
0,39
0,44
0,40
0,38
11,6%
-7,6%
-5,3%
IT services
1,15
1,13
1,20
1,17
-2,3%
7,0%
-3,0%
• During 2005 all sub-sectors suffered from reduced turnover, but in 2006 sales
are expected to boost by 10%
•Carrier / internet services remains the most healthy and growing part of
the ICT market. Quite satisfactory results reported in IT services, ICT
manufacturing and Software seem to face several difficulties. Mixed picture
in ICT trade.
10
The Greek ICT sector: main facts

3rd CSF: ~6% of their annual turnover



Size matters: Positive relationship between size and
participation in CSF projects
Smaller firms as sub contractors
Only 8% of the turnover comes from exports (in
the Balkans)


Mostly box moving, and manufacturing
Almost 60% active only in the domestic market


Some “export intensive” firms from IT services
Market structure: Public sector: 8%, Β2B: 65%
B2C: 27%

Small niche markets in Banks, Health, Shipping.
11
Sources of Growth / Barriers
Sources of growth
 ICT projects funded by the OPIS
 Diffusion of ICTs in other sectors of the economy
 Level of education and training related to ICTs
 Foreign investments
 Sufficient personnel
Barriers to growth
 Small domestic market
 Cost of access / use of Internet
 Limited ICT skills and e-mentality of the population
 Lack of organizational change (Inertia to change)
12
Group Α: Established
•
•
•
•
•
High size of turnover
Founded before the 90s
Mostly trade / box moving
Limited export activity
Average investments, R&D, personnel training and education
Group Β: Rapidly growing
•
•
•
•
•
•
4 Clusters
Middle sized in terms of turnover
Founded after 1990
Mostly IT services
Export oriented
R&D intensive
Positive trends in terms of employment
Group C: Laggers
•
•
•
Limited turnover
No export activity
No R&D expenses
Group D: Rest
•
Mixed picture
13
Sources and Barriers for growth in the
Greek ICT sector

Global & European economies keep on growing fast, international trade is increasing, Greek
economy holds its high growth rates. Domestic demand is high, business climate is
improving, some reformatory policy initiatives have been introduced. However, long lasting
structural problems of the Greek economy and delays in the implementation of necessary
policy measures create difficulties for all firms, touching upon ICT firms as well:


Domestic demand for ICTs is of small scale and problematic. Public sector’s demand is not
strong and is hindered by bureaucracy: Important ICT projects are implemented with
significant delays.


Favourable macroeconomic environment, but not a necessary and mandatory condition for the
sector’s growth.
A secondary demand, induced by familiarization of citizens and firms with ICTs and by the
proliferation of electronic services, is far more important.
Most important market: firms and then consumers. However, they both face some common
problems:


lack of information and knowledge about ICT benefits, technophobia, limited ICT skills,
organizational difficulties in adopting organizational changes required
A large part is not convinced about the tangible benefits of ICT investments (responsibility of ICT
firms as well).
14
Sources and Barriers for growth in the
Greek ICT sector


External demand is increasing, but attracts only a small number of firms. ICT exports have
been limited so far and stem mainly from some large manufacturing firms, box moving,
(exception: some smaller export-oriented IT firms).
Some positive signs: domestic ICT demand is increasing, firms try to exploit the external
demand. A significant number of large and medium-sized firms are already “connected” and
adopt more advanced ICT tools. Throughout their value chain they cooperate with numerous
smaller firms which will be forced to collaborate, in order to maintain their big clients, even if
they are not convinced about the benefits of ICT investments.


As younger and more intense ICT users are entering in the economic activity they will leverage ICTs’
diffusion in the country.
State’s role in creating a secondary demand is also reinforced: more informative and training
campaigns, e-government is increasing, experience improves efficiency in adopting new
technologies,

Most of the important ICT projects are expected to operate, offering additional services which will
provide cost benefits, efficiency, and productivity gains. Besides, at the public policy level, initiatives
and actions concerning directly or indirectly the information society are proliferating
15
Sources and Barriers for growth in the
Greek ICT sector



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Supply side: scattered, small in size, with numerous firms, limited market specialization: A
relatively new sector, in a area with rapid technological developments, may be responsible
for the lack of an established entrepreneurial culture. Price competition is intense, but all
the firms seem to sell similar products / services without any substantial differentiation.
The sector is innovative, but R&D is very scarce and limited to a small number of firms.
These firms mostly collaborate with universities, on the basis however of an interesting,
extensive and important research agenda.
Important barrier for the sector’s growth: limited broadband diffusion and poor
infrastructures. Improving infrastructures is a basic precondition for further growth, as
they allow more attractive, and at a reasonable price, services, which can attract broader
categories of population and firms. Public and private investments in broadband
infrastructures, are positive signals for the future.
The sector’s growth is benefited by the technological convergence between IT and
Telecommunications and the innovative value added services that are created, based on
advanced infrastructures (triple play services,IPTV services, video on demand, VoIP,
integrated solutions for B2B and B2C could attract broader categories of users.
16
Sources and Barriers for growth in the
Greek ICT sector



Firms are moderate optimistic, as the poor financial results of the past seem to be
overcome, leading to greater liquidity. Furthermore, projections for 2006 and 2007 show
an increase in the turnover, despite the small recession in 2005. Thus, positive prospects
for the expansion of ICT market can be reflected at their financial data in the next couple
of years.
Employment and investments (especially in the telecommunications) are estimated to
increase, firms report that they intend to intensify their efforts for greater differentiation,
specialization, and focus on niche markets. Moreover, some restructuring actions have
been taken, in order to rationalize the sector’s structure, while the increased interest from
foreign investors indicates that there are some good business opportunities in the
domestic market. At the same time, the sector gradually accumulates know-how and
experience, by implementing large scaled and innovative ICT projects. This is a
competitive advantage that should be further exploited at the international level and
especially in the neighbouring countries.
Another important advantage : Sufficient well-educated scientists & engineers and
managers in the sector, despite the missing link between firms and universities concerning
their familiarization with market conditions. Need for more intense collaboration in that
area as well.
17
Therefore: positive prospects...

The prospects for the ICT sector in Greece for the next couple of years are
moderate optimistic:
The macroeconomic environment still remains favorable.


Gradual softening of demand and supply limitations.

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Younger intense ICT users, increasing household expenditure.
Large and medium-sized firms are connected and impose new forms of cooperation
with smaller firms.
Empowerment of the state’s role not only as an investor for the ICT sector, but also
as a provider of electronic services with tangible benefits for the users.
Increased external demand from neighboring countries, but time is pressing
Foreign investments indicate that there are some good business opportunities.
Driving forces: Telecommuncations and new value added services: benefits
from the convergence between informatics and communication.


Fast growth rates, increasing investments, improved business climate.
Advanced infrastructure, better, less expensive and more attractive services.
Increase in employment and investments (especially in telecommunications).
18
… but under preconditions:






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Increase of public and private investments on broadband infrastructures, which will
lead to increasing competition in telecommunications and gradually in the IT
market with new value-added products/ services: contribution to further diffusion of
Internet.
Development of Greek digital content, which will lead to: a) a more intense
diffusion of the Internet to eager potential users and some dynamic firms that are
willing to participate in the IS, in combination with further training, b) the diffusion
of ICTs in other sectors of the Greek economy
Reinforcement of training/ advisory/ educational actions mainly by the State, but
also supported by a more consumer-oriented strategy by firms.
The more intense integration of ICTs in Public Administration, so as to offer real eservices, and not reproducing bureaucracy (e- bureaucracy?).
The role of Public as a service provider that facilitates the citizens and firms’
activities should be further upgraded.
Extroversion efforts from those who are capable for such actions, clearing up the
field from problematic cases from the past, and speeding up the necessary mergers
& acquisitions, ownership transitions, etc.
The reinforcement of a more profound and intense collaboration between
universities and firms, so as to ensure a better fit of market needs and human
capital preparation, while improving the R&D collaboration as well.
19
Some policy proposals…

At the ICT firm level

Restructuring actions, M&A, and strategic alliances should be fastened
with the aim of rationalizing and improving the efficiency of sectors’s
structure.





…combined with efforts of specialization, market segmentation and focus on
niche markets – especially mainly by small firms
…but also innovation and differentiation through more intensive R&D, in
collaboration with universities and research centres
Consumer-oriented strategies with the emphasis placed upon a) the cost
for ICT users and b) the promotion of the ICT benefits to those that are
willing, but also to the more cautious potential users
Investments on infrastructure that allow integrated high value - added
services but also further collaboration, in order to develop a Greek and
sector-based digital content.
Extroversion efforts by those that are capable, in order to exploit
business opportunities that still exist in the neighbouring countries.
20
Some policy proposals…
At the level of public policy for the IS

Improvement of broadband infrastructure, development of additional digital
content and new e-government higher value -added services

Emphasis on organizational change in the Public sector, so as to improve
efficiency in integrating ICTs that lead to a transformation of the actual e-service

Expansion of ICTs use in Public Administration, in order to improve its functions,
operation and efficiency

Integration for the regulatory framework for telecommunications, but also…



Boosting training concerning ICTs, in order to bridge the digital gap




..empowerment of EETT (National Regulatory Service for telecommunications) while
allowing for a greater independence and continuation of its management
…with additional motives not only for the adoption of ICTs by citizens and firms, but
also for a more intensive use
…and motives for firms for further education and training of the employees that lack
those capabilities
Use of ICTs in the teaching processes and reinforcement of the teaching of ICTs
at all levels of education, so as all graduates will have developed some ICT skills
Simplification of the procedures for the public offerings and tenders which will
allow for a tighter project implementation cycle
21